Abstract:

We construct a two-stage game to analyze how the rate of profit sharing affects behaviors of firms and employees. We explore such impact under situations that before and after new policy of expensing employee’ profit sharing in Taiwan respectively. According to this study, we find that the rate after expensing will be higher than before. However, if management echelon takes self-interests into account or employees care about the relative profit sharing rate to those in the other firms, the rate may be smaller than before, under some situations, contrast with common impression that the policy of expensing employee profit sharing will raise the rate of profit sharing. We further discuss two-firms competition with Cournot analysis, showing that the optimal rate of profit sharing would be the same. This article addressed that the essence of profit sharing program and elaborate how the policy of ESOPs expense affects high-tech firms in Taiwan.